Fidelity continues markdowns, cuts fair value of Gupshup and Pine Labs

Fidelity, along with a lot of US-based AMCs, has been marking down the fair values of Indian startups.

US-based Asset Management Company (AMC) Fidelity Investments, one of the largest investors in the world, has continued marking down the fair values of Indian startups as companies experience slower growth rates amid macroeconomic headwinds.

After knocking Gupshup out of the unicorn club in March by effectively valuing it at $957 million, Fidelity has cut the fair value of its stake in the company by another 8 percent, now valuing it at $882 million as of May 31. The AMC has also cut the fair value of fintech unicorn Pine Labs by about 9 percent, valuing it at about $4.5 billion, its filings with the US Securities and Exchange Commission (SEC) showed.

Pine Labs was last valued at $5 billion, while Gupshup last raised funds at about $1.4 billion valuation.

Reacting to Fidelity's markdown, Amrish Rau, co-founder and CEO of Pine Labs, in a tweet, said, "Some investors evaluate the business closely every quarter and revisit the assumptions (if required) to their initial model at the time of investment, (while) some simply hold it at the cost of acquisition."

"Some value it as per the latest fundraise (and) there are some investors who don’t care about the short-term, tend to be very conservative in their valuation calculation. In summary, it’s difficult to know the true value of the business till there is a new term sheet on the table," he added.

Fidelity, along with a lot of US-based AMCs such as Invesco, Baron Capital, and Private Shares Fund among others, has been marking down the fair values of Indian startups since the second half of December last year amid deteriorating macroeconomic environment, which led to slower growth for startups.

Slower growth, coupled with an elongated funding winter, also pushed startups to prioritise profitability over growth as companies looked to extend runways by saving costs. So far, unicorns in India including Byju's, Swiggy, Meesho and Eruditus among others have seen their fair values getting slashed.

It is important to note that these adjustments to fair values are typically based on AMC's internal assessment of the macro and microenvironment. They do not necessarily indicate a permanent markdown in the startup's overall valuation.